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Nepal improves budget transparency; still more room for participation

Jan 31, 2018

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Nepal has increased its score in Open Budget Index (OBI) – the world’s only independent and comparative measure of budget transparency.

According to the Open Budget Survey (OBS) global report launched today, Nepal increased its budget openness score to 52 from 24 in 2015. Freedom Forum – a Civil Society Organization working in the area of public financial management – conducted the OBS for Nepal as a representative of the International Budget Partnership (IBP).

Each country receives a composite score (out of 100) that determines its ranking on the Open Budget Index. The biennial OBS assesses the country’s budget transparency, people’s participation in budget process and strengths of budget oversight agencies – the Supreme Audit Institution and Legislature.

Drawing on internationally accepted criteria developed by multilateral organizations, the Open Budget Survey uses 109 equally weighted indicators to measure budget transparency. These indicators assess whether the central government makes eight key budget documents available to the public online in a timely manner and whether these documents present budget information in a comprehensive and useful way.

Nepal’s 2017 OBS country summary report stated that Nepal’s score of 52 out of 100 is moderately higher than the global average score of 42. With this Nepal has become the South Asian leader in regard to budget openness score followed by Afghanistan (49), India (48), Pakistan (44), Sri Lanka (44) and Bangladesh (41). The OBS was held in a total of 115 countries around the globe.
“Open budget score for Nepal has changed over the time with 24 in 2015, 44 in 2012, 45 in 2010, 43 in 2008 and 36 in 2006”, shared the report. Nepal’s score on the Open Budget Index in 2015 declined sharply to 24 due to the late publication of the Executive’s Budget Proposal, in OBS 2017 the country’s score rose substantially to 52, said Forum’s Chief Taranath Dahal who was involved in the survey.

However, the report reveals that Nepal still provides the public with limited budget information; offers few opportunities for the public to engage in the budget process and the legislature and supreme audit institution in Nepal provide limit oversight of the budget.
Since 2015, Nepal has increased the availability of budget information by publishing the Executive Budget Proposal in a timely manner. However, as in other rounds of budget survey, Nepal has failed to make progress in producing a Pre-Budget Statement and a Citizens Budget.

According to the report, the Executive’s Budget Proposal was not provided to legislators at least two months before the start of the budget year; legislative committees did not examine and publish reports on their analyses of the Executive’s Budget Proposal online.
To measure public participation, the Open Budget Survey assesses the degree to which the government provides opportunities for the public to engage in budget processes. Such opportunities should be provided throughout the budget cycle by the executive, the legislature, and the supreme audit institution.

The Open Budget Survey also examines the role that legislatures, supreme audit institutions, and independent fiscal institutions play in the budget process and the extent to which they are able to provide effective oversight of the budget. These institutions play a critical role — often enshrined in national constitutions or laws — in planning budgets and overseeing their implementation.
These indicators were revised to better assess the role of formal oversight institutions in ensuring the integrity and accountability in the use of public resources. Therefore, data on the role and effectiveness of oversight institutions in the Open Budget Survey 2017 should not be compared directly to data from earlier editions.

The Open Budget Survey uses internationally accepted criteria developed by multilateral organizations from sources such as the International Monetary Fund (IMF); the Organisation for Economic Co-operation and Development (OECD); the International Organisation of Supreme Audit Institutions (INTOSAI); and the Global Initiative for Fiscal Transparency (GIFT).

Nepal’s Legislature-Parliament provided limited oversight during the budget cycle. This score reflects that the legislature provided weak oversight during the planning stage and implementation stage of the budget cycle.

The supreme audit institution provided adequate budget oversight. Under the law, it has full secretion to undertake audits as it sees fit. Moreover, the head of the institution is appointed by the legislature or judiciary and cannot be removed without legislative or judicial approval, which bolsters its independence.

Finally, the supreme audit institution is provided with sufficient resources to fulfill its mandate and its audit processes are reviewed by an independent agency.

Nepal does not have an Independent Fiscal Institution. While IFIs are not yet widespread globally, they are increasingly recognized as an important source of independent, nonpartisan information.

Nepal should prioritize the actions to improve budget transparency that include producing and publishing a Pre-Budget Statement and a Citizens Budget, providing detailed data on macroeconomic forecast as well as data on the financial position of the government in their Executive’s Budget Proposal, increasing the information provided in the In-Year Reports and the Enacted Budget.

To improve public participation in its budget process, Nepal should prioritize actively engaging with individuals or civil society organizations representing vulnerable and underrepresented communities during the formulation and monitoring of the implementation of the national budget, hold legislative hearings on the formulation of the annual budget, during which members of the public or civil society organizations can testify, establish formal mechanisms for the public to participate in relevant audit investigations.

To make budget oversight more effective Nepal should ensure that the Executive’s Budget Proposal is approved by legislators before the start of the budget year, ensure the legislature is consulted prior to shifting funds between administrative units away from what is specified in the Enacted Budget during the budget year and the spending of any unanticipated revenue, consider setting up an Independent Fiscal Institution to further strengthen budget oversight.

With the adoption of a federal governance, a significant share of the budget is now going to the local level government. And hence, adopting budget transparency and people’s participation in the budget process and strengthening oversight agencies would promote wise spending of the public money and its subsequent outcomes to transform the people lives.

The report encloses freedom of press and expression updates from January to December 2018 which highlighted a total of 98 press freedom violations during this passing year 2018, a sharp rise compared to the previous year, 2017. Only 66 incidents were recorded in 2016.

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